Jim Chalmers urges Australians to be optimistic about future as 2025 election looms
Jim Chalmers concedes most Australians will be ‘pleased to see the back of 2024’ and the inflation pain it inflicted on households, urging voters to be optimistic about the year ahead.
Jim Chalmers has conceded that most Australians will be “pleased to see the back of 2024” and the inflation pain it inflicted on households, but has urged voters to be optimistic about the year ahead on the promise of an improvement to their lives.
In an acknowledgment that plummeting living standards had become a key political risk for Labor at the next election, the Treasurer told The Australian that although the Albanese government acknowledged the past year had been difficult for people, he was now asking them to believe that the worst was behind them.
“A lot of Australians who’ll be pleased to see the back of 2024 can now be a bit more optimistic about the future,” Dr Chalmers said in an end-of-year interview with The Australian on Sunday.
He said 2024 was “a difficult one” but “Australians have made some welcome progress together in our economy and that means 2025 will be better as a consequence”.
Dr Chalmers’ pitch to voters will become a key theme of the Labor campaign for this year’s election – that there are “better days ahead” – based on his assertions that underlying household pressures will ease in 2025 as inflation moderates and there is hope of at least two interest-rate cuts over the next 12 months.
“The worst of the inflation challenge is behind us – it’s not mission accomplished by any means and we’re not getting carried away, but better days are ahead,” Dr Chalmers said.
“There are lots of reasons to be cautious and not complacent, but lots of reasons to be a bit more confident and optimistic about the coming year as well.
“I share the RBA’s view in its most recent meeting minutes that we are getting on top of inflation and that’s obviously a good thing.
“There’s still a lot in the global economy to concern us, but we’ve kept the economy growing, inflation down, unemployment low (and) real wages and incomes are up again.
“Many countries would gladly swap our economy and our budget for theirs. Most of the developed world has gone backwards but we haven’t – we’ve still more than halved inflation and unemployment has a three in front of it which is absolutely remarkable given everything coming at us.”
Dr Chalmers said he was “proudest of what we did last summer to make sure everyone got a tax cut because that’s the policy which is doing the most good at a difficult time for people”.
“We’ve been planning and preparing for a soft landing in our economy, and that’s what economists are seeing as increasingly likely,” he said.
Dr Chalmers’ forecast of a better year ahead on the economic front sparked mixed reaction from some economists predicting a long road ahead in the restoration of the living standards lost to inflation and interest rate rises over the past two years. Economist and budget forecaster Chris Richardson predicted that 2025 would be only mildly better but there was longer-term pain that the political class was ignoring.
“Yes, things may get better in 2025, but they just don’t get a lot better and won’t get better fast,” Mr Richardson said.
“At some stage interest rates may start to fall but they won’t fall soon, so it remains an open question as to whether they fall before the election or not. They could. But if you look at the largest pain point in the demographics is the increasing interest-rate costs.”
Mr Richardson was referring to a Newspoll demographic analysis published in The Australian last Thursday showing that the mortgage belt 35-49 year old voters had turned against the government
“The wheel of pain will start to turn … to the extent you have interest rate cuts by the end of 2025. The consensus is three rate cuts,” he said.
The second issue facing the government is the slowdown in wage growth. However, with the likelihood of a continuation of electricity rebates, and wages continuing to be slightly ahead of prices, It may be enough to keep CPI below wage growth.
“The biggest losers (being mortgagees) will start to lose less,” Mr Richardson said.
“Wage earners will go ahead but not by much. But taxpayers will hurt a bit. Add those three components together and you will see some form of improvement in living standards. But we are still at the tail end of the fight against inflation.”
Mr Richardson cited American economist Paul Krugman’s famous quote that “productivity is not everything … but it’s almost everything”.
“And politicians will say what they like but at some stage unless there is an attempt to get a more efficient Australia, it is going to be a low ground in the recovery for living standards for Australians,” he added,
The recent mid-year economic and fiscal outlook, however, did not paint as optimistic an outcome for 2025 with economic growth downgraded by another quarter of a percentage point and longer and deeper budget deficits.
Opposition Treasury spokesman Angus Taylor accused the government of denialism in the face of a cost-of-living crisis.
“There is absolutely no reason for optimism under this Labor government and this Treasurer,” Mr Taylor said.
“Labor’s economic management has delivered Australians the worst collapse in living standards on record.
“The economy has come to a grinding halt, productivity is in free fall, GDP per capita has gone backwards for a record seven consecutive quarters and interest rates have risen 12 times since Labor was elected. We’re at the back of the global pack on core inflation, which has recently risen in Australia because of the Albanese government’s disastrous policies and economic mismanagement. Only the Coalition can deliver a strong back-to-basics economic agenda that gets inflation down, the cost of living down, and gets Australia back on track.”
Dr Chalmers said that a combination of ensuring more people were in work, earning more and keeping more was this Government’s reason for being, and our policies are helping on all three fronts.
Economist Saul Eslake said there was no guarantee that the country was on a road back to prosperity.
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